Judgment date: 31 July 2009
EMAS Offshore Pte Ltd v The Ship "APC Aussie 1"  FCA 872
Federal Court of Australia1
- The plaintiff arrested a barge pursuant to a maritime claim against the demise charterer of the barge. The owner of the barge then commenced proceedings against the plaintiff and terminated the demise charterparty. Rares J in admiralty refused the plaintiff's subsequent application to amend the writ by adding a contractual claim for indemnity against the demise charterer.
- The effect of the amendment (if allowed) would have been to require the owner of the barge to post security for the full amount of its own claim against the plaintiff in order to obtain release of the barge from arrest.
The Australian company, APC Marine Pty Ltd ("APC") owned the pipe-laying barge Aussie APC 1 ("the Barge"). APC demise chartered the barge to another Australian enterprise, T-D Joint Venture Limited ("T-D"). On 23 June 2008, T-D entered into a time charter of a tug from its owner, the Singaporean Corporation EMAS Offshore Pte Limited ("EMAS"). The time charter in Barecon 2001 form required EMAS to provide offshore towing services to the barge.
EMAS' tug towed the barge to Bass Strait where it carried out work, then began to tow the barge back to Singapore in May 2009. On 22 and 23 May 2009, the tow rope came away off the New South Wales coast and the barge allegedly sustained substantial damage. The tug later recovered the barge and towed it into the port of Newcastle, north of Sydney.
Arrest of the barge in Australia
On arrival in Newcastle, EMAS had the barge arrested under a writ issued on 27 June 2009 and served on the barge the following day. The writ named T-D as defendant, alleging breach of the time charter of the tug. The amount claimed was A$788,600 and an additional US$84,670. The particulars identified T-D as the demise charterer of the barge and invoked the Court's jurisdiction under sections 4(3)(m) and 18 of the Admiralty Act 1988 (Cth).2
On 14 July 2009, EMAS learnt that APC had filed proceedings in rem in the High Court of the Republic of Singapore against EMAS as owner of the tug. The writ claimed compensation arising out of damage suffered by the barge when the tow rope came away on 22 and 23 May 2009, and cited allegedly negligent navigation or operation of the tug whilst it was towing the barge. The writ also claimed a declaration that EMAS fully indemnified APC Marine in respect of the same incident. Correspondence indicated that the quantum of damages/indemnity sought was approximately A$14 Million.
On 21 July 2009, APC terminated its demise charter to T-D and re-took possession of the barge, subject to her remaining in continuing custody of the Marshal in Admiralty. APC entered an appearance in the Federal Court of Australia proceedings, and on 30 July 2009 sought to pay into court the sum of A$1,439,601.05 to secure the release of the barge from arrest.3
The following day, 31 July 2009, APC sought an order for the immediate release of the barge from arrest. EMAS appeared, opposed release of the vessel, and made an oral application for leave to file an amended writ. The proposed amended writ in particular sought to expand EMAS' claim by adding the words "and the Plaintiff has a right of indemnity against T-D Joint Venture Pty Ltd in the amount of AUD14 million"4. APC opposed this amendment.
Decision of Rares J
The Admiralty Judge (Rares J) dealt with the matter urgently. He held that the amendment was not a mere particular, but the addition of a new maritime claim against T-D. Whilst both the Admiralty Rules5 and the Federal Court Rules6 permitted such an amendment, Rares J refused in his discretion to allow the amendment on the facts of this case.
He noted that the new claim would be made, in effect, against the property of APC (since APC would have to put up security for the additional A$14 Million if it wanted release of its vessel), yet since APC had terminated the demise charter with T-D on 21 July 2009, it no longer had recourse to a current demise charterer. T-D now had no proprietary interest in the barge, and the amendment, if allowed, would extend the ambit of the security for which the arrest was obtained to a cause of action not previously contemplated in the writ. If granted, the amendment would have the effect of greatly expanding the amount of security that EMAS could require for release of the barge before its owner would be able to exercise its proprietary rights, even though the new claim involved no direct relationship between EMAS and APC. Rares J held:
"The Court should be cautious to allow an amendment if there has been a change in the vessel's ownership or the person in possession, subsequent to the arrest and the proposed amendment seeks to add to the writ, against the previous owner or previous demise charterer (as a relevant person), a substantial new and substantively different cause of action that could not be made in fresh proceedings if brought at the time of the amendment application".
This was particularly so when the amendment was proposed well after EMAS became aware of APC's Singaporean writ, and after APC had terminated the demise charter.
However, although making clear that his decision was an exercise of discretion on an urgent application, Rares J indicated, obiter, that he was inclined to the view that as a matter of law a claim such as this could not be supported by s 18 of the Admiralty Act7. He noted "substantial policy reasons" why the Admiralty Act provides in s 18 only limited circumstances in which vessels may be arrested under a demise charter so as to hold the demise charterer liable as a relevant person.
Having rejected EMAS' application to amend, and noting that APC was prepared to pay an appropriate amount into court, the court allowed the release of the barge from arrest.
A number of admiralty jurisdictions allow the arrest of vessels on demise charter, including, for example, England, Australia, New Zealand, Hong Kong and Malaysia. The decision of Rares J indicates an important practical limitation on such use of arrest. The demise charter having been terminated, the fact that the amendment sought to add a claim that had no direct relevance to the owner proved fatal to the plaintiff's application.
The decision reinforces the need for an owner to move quickly and clearly to terminate a demise charter in circumstances where the charter has "gone bad".
1 Rares J
2 On 3 July 2009, EMAS amended the writ to add a small sum to the US$ claim, an additional A$1 Million and a reference to a claim under s4(3)(j) of the Act as another basis of claim. However, nothing turned on this.
3 This sum included EMAS' monetary claims for outstanding hire and cost of bunkers, cost of arrest and release, anticipated costs of the proceedings, and interest for 12 months at 9%. Additional sums were paid into court by EMAS and APC in respect of the Marshal' costs and expenses.
4 Clause 14(b)(ii) of the time charter provided for the charterer to give an indemnity to the tug-owner, including a promise that: "... the Charterers shall Indemnify, protect, defend and hold harmless the Owners from any and against all claims, costs, expenses, actions, proceedings, suits, demands and liabilities whatsoever arising out of or in connection with such loss, damage, liability, personal injury or death."
5 Rule 36 of the Admiralty Rules 1988 (Cth)
6 Order 13 Rule 2 of the Federal Court Rules 1976 (Cth)
7 Section 18 of the Admiralty Act 1988 (Cth) provides: "Where, in relation to a maritime claim concerning a ship, a relevant person: (a) was, when the cause of action arose, the owner or charterer, or in possession or control, of the ship; and (b) is, when the proceeding is commenced, a demise charterer of the ship; a proceeding on the claim may be commenced as an action in rem against the ship."
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